Feasibility Study Project for the JCM (2015FY)

A Survey on Feasibility of Torrefaction System

using Biomass in Indonesia

March, 2016

Japan Coal Energy Center

Mizuho Information & Research Institute, Inc.
YAMATO SANKO MFG. CO., LTD.
This report summarizes the results of A Survey on Feasibility of Torrefaction System using
Biomass in Indonesia, a feasibility study conducted by Japan Coal Energy Center (a general
incorporated association), Mizuho Information & Research Institute and Yamato Sanko Mfg.
Co., Ltd. for the Ministry of Economy, Technology and Industry for its Feasibility Study
Project for the JCM, 2015FY.

1. General information
1.1 State of energy generation
The Ministry of Energy and Mineral Resources (MEMR) of Indonesia, one of the
governmental agencies responsible for Indonesia’s electricity sector, supervises PLN and
regulates the natural resources and energy sector as a whole. PLN is a national electricity
corporation owned and managed by a ministry responsible for government-owned
companies. PLN was the sole entity responsible for the generation, transmission and supply
of electricity in Indonesia until 1992 when the Independent Power Producer (IPP) system
was introduced. In addition, the Private Power Utility (PPU) system was introduced under
the Electricity Act of 2009 (Act No. 30 in 2009 commonly known as the New Electricity Act).
The PPU system created a new channel for retailing electricity directly to consumers.
Currently PLN accounts for a little over 80% of capacity. Private electricity companies
(under IPP or PPU) and independent power producers make up the rest.

IPP companies are required to obtain a license to run a power generation business under
the New Electricity Act Art.19 (2). They must sell all the electricity they generate to PLN
under long-term contracts typically for 25 years with PLN. Priority negotiating rights to
this Power Purchase Agreement (PPA) with PLN are acquired through bids invited by PLN.
They are not allowed to sell electricity to the consumers by the condition mentioned above
that they must sell all the electricity generated by them to PLN.

PPU companies are required to obtain a license to run a power generation business just like
IPP companies. They can sell electricity to PLN only if PLN needs it. Business areas called
Wilayah Usaha (WU) can be allocated to them in which they can generate, distribute,
supply and retail electricity in an integrated manner, or supply and/or retail electricity. An
agreement from PLN and a permission from MEMR are necessary to obtain a WU.

Indonesia will need a total of 59.5 GW of additional power generation and supply to meet
the rising demand for power as its economy grows. PLN’s power distribution business plan
(RUPTL) indicates that PLN and IPP companies will develop a power supply of 16.9 GW
(28%) and 25.5 GW (43%) respectively. For the rest of 17.1 GW (29%), however, no
developers or investors have been found yet. With regards to the types of power plants, it is
planned that new coal-fired power generation will account for 37.9 GW (63.8% of the total).

In July 2015, taking into consideration Indonesia’s overall energy policies, the Directorate
General of Electricity of the Ministry of Energy and Mineral Resources published a draft
version of the National General Plan on Electricity (RUKN 2015-2034) as a general
electricity development plan, which seemed to be in line with a plan the President of
Indonesia announced in May 2015 to construct new power plants with a total capacity of 35
GW.

1.2 State of biomass power generation

Although biomass consumption in Indonesia grew 0.33% between 2000 and 2012, its
contribution to the energy mix constantly decreased in the same period. Indonesia’s biomass
energy generation capacity is about 50,000 MWe, but the actual electricity generated using
biomass and supplied to PLN is 200 MWe, which is only 0.4% of the capacity.

The Feed-in Tariff system (FIT system) for biomass power generation was established by
Ordinance No.27/2014 of the Ministry of Energy and Mineral Resources (MEMR). This
system is revised when required.

1.3 Trends in biomass fuel policies

Policies to promote the use of biomass for energy generation have been adopted including
the Renewable Energy Purchase System (established on June 2, 2012 to be applied to
bioenergy, hydropower, etc.) and laws and orders that promote renewable energy (President
Order No.1/2006 and Ordinance No.32/2008 of the Ministry of Energy and Mineral
Resources for promotion of generation and use of bioenergy).
In 2006, the government introduced, as a biofuel blending mandate, B5 (a diesel oil mixture
which contains 5% biodiesel) and E5 (a gasoline mixture which contains 5% bioethanol)
under President Orders No.5/2006 and No.1/2006. In addition, they started to introduce
B7.5 which contains 7.5% biodiesel as a fuel for transportation in 2012, increased the
blending ratio of biodiesel to 10%, and directed the power plants to increase the ratio to 20%
in 2014. In January 2016, a directive was issued to introduce a B20 mandate.

In February 2015, the government announced an increase in biofuel subsidy to protect

domestic biofuel producers, which they expect to give domestic producers a compensation
for an increasing price gap between regular diesel and biodiesel caused by the plunge in oil
prices all over the world.

The government made the use of bioethanol and biodiesel mandatory and established a
subsidy system to encourage investments to biofuels. It is not clear, however, how the
government will enforce the mandate, which makes it unclear if this incentive will actually
achieve the objective.

Pertamina, a state-owned corporation, developed a biodiesel for transportation in 2006.

Others including private companies started to produce biodiesel in 2005. As of 2014, the
biodiesel industry as a whole has a capacity of 5.4 million KL, but its operating rate is not
high.

MEMR encourages the industry to expand the current production capacity of 5.87 billion
liters in view of a future shortage in biodiesel supply they predict to occur in 2016 and
thereafter if the new biofuel mandate program proves a success. The steep growth in
biodiesel production has exceeded the rate of growth in general consumption and export in
Indonesia. It resulted in a buildup of biodiesel between 2010 and 2013, which is expected to
increase further.

1.4 State of the palm oil industry

Indonesia and Malaysia together account for about 85 to 90% of world palm oil production.
Indonesia is currently the largest palm oil producing and exporting country in the world. In
2011 Indonesia accounted for 48.79% of world crude palm oil production. It produced 28
million tons in 2012.

Palm oil is ranked 3rd in export in Indonesia. The acreage allocated for palm oil production
accounts for 31.6% of the total arid area. The area of palm plantations, which is now 8
million hectares, is expected to expand to 13 million hectares by 2020.

Almost 70% of Indonesia’s palm plantations is located on the island of Sumatra, with the
rest of 30% is located on the island of Kalimantan. About 40% of Indonesia’s palm-related
companies and nearly 500 plants are located in Sumatra.

Almost the same amount of empty fruit bunch (EFB) as palm oil is yielded as a waste. But
large companies use EFB as a fertilizer. In addition, it is expected that about 10 million
tons/year of EFB coming out from palm oil press mills operated by middle-to-small
companies can be used as fuel.

2. EFB torrefaction experimentation

2.1 Method
A taco rotary dryer owned by Yamato Sanko was used for these EFB torrefaction tests. This
model provides efficient drying and torrefaction. It also allows processing at a temperature
close to that of exhaust boiler gas observed at palm factories. The EFB sample used in these
tests was sent from Indonesia. A test using wood chips was conducted before the EFB
torrefaction tests to confirm the proper functioning of the machine and set conditions for
the experiment. Since the size of the EFB sample sent from Indonesia was not appropriate
to feed the machine, we adjusted its size using scissors and simple cutting machines before
the experiment. The machine used in these tests for torrefaction was a rotary drum (model’s
code at Yamato Sanko is TRD-03) that was 0.5 m in diameter, 1.5 m in length and 0.3 m3 in
volume. LPG was used as the heat source. The feed rate was 24 kg/h, 20 kg/h, 16 kg/h or 10
kg/h. The feed rate was inversely proportional to the residence time of EFB in the dryer. We
observed how the properties of the torrefied sample changed. The inlet and outlet
temperatures were 250 – 280 °C and 180 – 190 °C respectively. The EFB torrefaction tests
were conducted in the temperature range in which the sample temperature was about
130 °C. Usually the atmospheric oxygen concentration in torrefaction tests needs to be
decreased as EFB is dried to such a low moisture content that there is a risk of spontaneous
combustion. In our tests we decreased the oxygen concentration by spraying the inside of
the circulating duct with water to increase the humidity, which created a wet gas
atmosphere containing less oxygen. When we accidentally fed large-size empty fruit
bunches early in the experiment, we observed that processed materials were tangled to each
other to make a net-like formation. This observation made us realize that selecting the right
type of crusher which is used before drying would play a very important role in making
plans for operational machines.

2.2 Analysis
The torrefied EFB was analyzed based on JIS for coals. The analysis included total moisture,
proximate analysis (ash, volatiles and fixed carbon), element analysis (total sulfur, carbon,
hydrogen, oxygen, nitrogen, total chlorine), lower heating value, ash components (SiO2,
Al2O3, Fe2O3, CaO, MgO, P2O5, Na2O, K2O, V2O5, TiO2, Mn3O4, SO3), TG
(thermogravimetry in nitrogen), HGI (hardgrove grindability index), and ash melting point
(95% coal + 5% torrefied EFB and 90% coal + 10% torrefied EFB). The major results are
summarized below.

 The TG values of EFB indicate a 42.3% decrease in weight caused by dehydration up

to 120 °C. Little change in weight was observed from that temperature up to 240 °C.
Again a steep decrease in weight (31.1%) was observed between 240 and 360 °C. This
temperature range seems to be the range in which torrefaction occurs. The weight
gradually decreased after that up to 1,000 °C, reaching a total 88.4% decrease in weight
at 1,000 °C.
 Since no major changes were observed in volatiles in the EFB feed before torrefaction
and the processed EFB in every run, it is expected that EFB can be further torrefied by
adjusting the temperature and residence time.
 The higher heating value of the EFB feed was approximately 1,900 kcal/kg. In
comparison, the average higher heating value after torrefaction of 4 runs was 4,620
kcal/kg. This result indicates that mainly dehydration occurred in the process.
 The ash melting points of the coal-torrefied EFB blend (blending ratios were 5% and
10%) were 1,350 – 1,420 °C. The data indicates the risk of ash adhesion inside the dryer
caused by potassium is low.
Estimate of costs associated with the implementation of the torrefaction equipment
Components needed to build the torrefaction equipment must be purchased and/or made in
Indonesia as much as possible to reduce the initial cost. We have been introduced to only a
few potential contractors during this feasibility study.

One of the machines which would play an important role is the crusher that cuts EFB into
fragments of suitable sizes before feeding it to the dryer. Given the fact that maintenance
work would be required because of blade wear and replacement, a local contractor who has
experience with EFB crushing must be selected.

The current estimated cost is 500 – 700 million yen per line (FFB 22.5t/h → EFB 5.2t/h)
including a pelletizer. A further research is required since this price varies a lot depending
on the assembly site (i.e. Indonesia or Japan).

3. Policy recommendation on the JCM in Indonesia

3.1 Introduction of a Feed-In Tariff for coal and biomass co-combustion power plant
With respect to middle-to-small sized (less than 10MW) biomass-only power companies, the
state-owned power corporation PLN is mandated to purchase electricity from them, and the
feed-in tariff system (FIT) has been set for these companies.

On the other hand, coal and biomass co-firing is not included in the FIT system. Preferential
treatments such as fixed preferential prices are not applied to them.

We described and recommended an FIT system shown below which is similar to the fixed
price purchase system for biomass power generation in Japan to the officials of the Ministry
of Energy and Mineral Resources of Indonesia, and received an answer that they will
consider an FIT system for coal and biomass co-firing if a coal and biomass co-firing power
generation business will be started in the future.
 Table 3.1.1 Overview of the Feed-In Tariff for Biomass Power Plant in Japan
(Tariff for FY 2015（per 1kWh）)

Forest thinnings listing,

Paper, food
sawdust,
Construction residues,
Biomass bark, etc/
～2MW 2MW～ wood waste sludge, Black
agricultural
liquor, etc
residues

FIT Tariff(JPY) 40+TAX 32+ TAX 24+ TAX 13+ TAX 17+ TAX

FIT Term 20 years

（Source: Agency for Natural Resources and Energy of Japan）

3.2 The Quality Standard for Biomass fuel in relation to the solid biomass fuel combustion
in the coal boiler
There might be some concerns that the biomass co-combustion possibly has a bad effect on
the coal boiler especially from the point of view of the noncombustible mineral content. We
propose Indonesian government (Ministry of Energy and Mineral Resources Republik and
BPPT) provide a biomass quality standard for power companies to relieve the above
concerns as described below.

PKS EFB
Torrefied unit Class 1 Class 2 Class 3 Class 4 ・・・
Wood chip
Torrefied
DimensionEFB unitmm Class 1
*** Class 2 Class 3 Class 4 ・・・
・・・
・・・
・・・
Torrefied content unitmm%
MoistureEFB
Dimension Class 1
***
●% Class 2
○% Class 3
●●% Class 4
○○% ・・・

Dimension
Moisture content mm%μm ***
●% ○% ●●% ○○% ・・・
・・・
・・・
grindability
Moisture content
grindability %μm ●%≦△△ ○% ●●% ○○% ・・・
・・・
・・・
Ash content w-% dry △△≦▲▲ ▲▲≦◇◇ ◇◇≦
Physical grindability
Ash content μm
w-% drydry ≦△△ △△≦▲▲ ▲▲≦◇◇ ・・・
・・・
・・・
Nitrogen w-% ― ― ≦ 1.0 ≦ ◇◇≦
2.0
characteristics Ash content
Nitrogen
Chlorine w-%
w-%dry
w-%drydry ≦△△
―― △△≦▲▲
―― ▲▲≦◇◇
≦≦1.00.1 ◇◇≦
≦≦
2.00.2 ・・・
・・・
・・・
Nitrogen
Chlorine w-%
w-%dry
dry dry ――― ――― ≦≦
1.0
0.14.0 ≦≦
2.0
0.28.0 ・・・
・・・
・・・
Arsenic mg/kg ≦ ≦
Chlorine
Arsenic w-% dry drydry
mg/kg ――― ――― ≦≦
0.1
4.040 ≦≦
0.2
8.080 ・・・
・・・
・・・
Chrome mg/kg ≦ ≦
・・・
・・・
・・・
Chemical Arsenic
Chrome
Copper mg/kg
mg/kgdry
mg/kgdrydry ――― ――― ≦≦
4.0
≦4030 ≦≦
8.0
≦8060
Chrome
Copper mg/kg
mg/kgdry
dry ―― ―― ≦≦
4030 ≦≦
8060 ・・・
・・・
characteristics Copper mg/kg dry ― ― ≦ 30 ≦ 60 ・・・

Figure 3.2.1 Image of the Quality Standard for Biomass fuel

3.3 Business plan for EFB torrefaction fuel

Our proposal on the scale and flow of power generation and sales of a potential EFB
torrefaction fuel business is described below.

Palm oil production

JCM Project Boundary EFB (51,000 t/y)

EFB crushing and drying (25,500t/y)

Electricity (1045kW), waste heat

Dried EFB (14,700 t/y)

Dried EFB (10,800 t/y)
Biomass power
EFB torrefaction
generation (2MW)
Steam (0.3t/h)
Torrefied EFB (12,000 t/h)

Electricity (235kW)
Torrefied EFB pellet production

Transport by land

Transport by sea

Pulverized coal-fired power generation (Japan) Pulverized coal-fired power generation (Indonesia)

Figure 3.3.1 Flow of power generation and sales

With respect to the business plan, cost and revenue information currently assumed or
acquired is summarized below.
 Table 3.3.1 Equipment Installation Cost
Initial investment cost item Cost Note
EFB crusher 320,000(thousand yen) In case the equipments are
procured from Japan. Cost
reduction by procuring locally
will be studied.
EFB dryer 220,000(thousand yen) In case the equipments are
procured from Japan. Cost

EFB torrefaction machine 120,000(thousand yen) reduction by manufacturing

locally will be studied.
Pelletizer 105,000(thousand yen) In case the equipment is
procured from Japan. Cost
reduction by procuring locally
will be studied.
Civil engineering and 50,000(thousand yen)
construction work
Other 40,000(thousand yen) Design, transport by sea
Total 855,000(thousand yen)

Table 3.3.2 Running and Maintenance/Management Cost

Running cost item Cost Note
EFB crusher Maintenance 47,000,000(yen) Blade exchange
Electricity 0(yen)
EFB dryer Maintenance 6,600,000(yen) 3% of EFB dryer
Electricity 0(yen)
EFB torrefaction machine Maintenance 3,600,000(yen) 3% of torrefaction
machine
Fuel 6,000,000(yen)
Electricity 0(yen)
Pelletizer Maintenance 14,000,000(yen) Reserve for Blade
exchange and
pelletizing
Electricity 0(yen)
Transport by land (unit price) 0.32(yen/t)
Transport by sea (unit price) 2.5(yen/t･km)
Labor 300 days/year,
2,700,000(yen) 2 shifts/day x 3
persons = 6
persons hired

Table 3.3.3 Revenue

EFB torrefied pellet buyer Expected price Note
Domestic (Indonesia) 60,000,000(yen) 12,000(t)x 5,000yen
Japan 240,000,000(yen) 12,000(t)x 20,000 yen

Table 3.3.4 Tax

Item Tax rate Note
Machinery import duty 5% Tax rate for dryer and Pelletizer
Biomass fuel export duty 15%
Value-added tax 10%
Corporate tax 25% The regulation below may be applied.
“A renewable energy investor is eligible
for net income reduction by 5 per cent of
the investment value each year, over a
six-year period (Ministry of Finance
Regulation No. 21/2010).”
 Our business scheme proposal on a torrefied EFB manufacturing and sales business is
shown below.

HASNUR Corp and

Other investors

Investment

Specific Purpose Company (SPC)

〇A torrefaction facility will be
Supply of
constructed at the HASNUR torrefied
Supply of Coal-fired power
HASNUR Corp EFB
EFB Corp’s palm oil press mill site
plant (Pulverized
Palm oil plant
〇EFB torrefaction and pellet
coal-fired)
manufacturing
〇Sales of torrefied EFB to power

generators

Construction contract, maintenance contract

Yamato Sanko and local company

Figure 3.3.2 Project scheme

4. Study on the MRV methodology and estimation of the emission reductions

4.1 Study on the applicable MRV methodology
The CDM methodologies in relation to this project are as follows.

 “Avoided emissions from biomass wastes through use as feed stock in pulp and paper,
cardboard, fibreboard or bio-oil production”（AM0057）
 “Co-firing of biomass residues for heat generation and/or electricity generation in
grid connected power plants”（ACM 0020）
 “Production of biodiesel for use as fuel”（ACM0017）

The draft JCM methodologies for this project was studied based on the AM0058.
 (1) Eligibility criteria
The draft Eligibility criteria and intendment of the each criteria are described in the table
below.

Table 4.1.1 Draft Eligibility criteria and intendment of the each criteria

No Eligibility criteria Intendment of the criteria

The project activity is the construction of a new Clarification of the targeting project.
1 torrefaction/carbonization plant that uses Application of the correspondent
agricultural wastes as feedstock; criterion of AM0057 with modification.
The torrefaction/carbonization plant is
Simplificaton of the project by
constructed within the same site of the
2 eliminating the transportation of
agriculture processing plant which produces
biomass residues. Newly added.
feedstock to the torrefaction/carbonization.
The waste should not be stored in conditions that
To avoid generating CH4. Application of
3 would lead to anaerobic decomposition and,
the correspondent criterion of AM0057.
hence, generation of CH4;

Emission reductions are only claimed for

Clarification of the emission reduction
avoidance of methane emissions when it can be
4 mechanism. Application of the
demonstrated that the agricultural residues are
correspondent criterion of AM0057.
left to decompose anaerobically;

To avoid leakage(CO2,N2O emissions

In case the biomass is combusted for the purpose from cultivation etc.) from biomass use
5 of providing heat or electricity to the plant, the when the biomass is combusted for
biomass fuel is derived from biomass residues heat/electricity produce. Application of
the correspondent criterion of AM0057.

The pyrolysed offgas and residues (char) will be To reduce GHG emissions from off-gas
further combusted and the energy derived thereof and waste emitted during the pyrolysis
6 used in the project activity. The residual waste process. Application of the
from this process does not contain more than 1% correspondent criterion of AM0057 with
residual carbon. modification.
 Simplificaton of the project by
All of the Torrefacttion/Carbonization
7 eliminating the transportation of waste
agricultural wastes are sold as fuels
from the plant. Newly added.

(2)Boundary
The boundary is described as follows.

Figure 4.1.1 Spatial extent of the boundary

Table 4.1.2 Summary of the source and GHG included in the boundary

Source CO2 CH4 N2O

Reference Emission from decomposition of

No Yes No
Scenario agricultural waste at the landfill site

Emission from onsite use of fossil fuels Yes No No

Project Emission from onsite use of electricity Yes No No

Activity
Emission of GHG in the off-gas from
No No Yes
the pyrolysis process
(3) Reference emissions
Reference emissions are calculated according to the formula which is the same as the
one provided as baseline emissions calculation in the CDM methodology AM0057.

REy = RECH4,SWDS,y

Where,
REy = Reference emissions in year y (tCO2e/yr)
RECH4,SWDS,y = Methane emissions avoided during the year y
RECH4,SWDS,y is calculated according to the formula defined in the CDM methodological
tool “Emission from solid waste disposal sites v 07.0” as follows.

16
𝑅𝐸𝐶𝐻4,𝑆𝑊𝐷𝑆,𝑦 = 𝜑𝑦 × (1 − 𝑓𝑦 ) × 𝐺𝑊𝑃𝐶𝐻4 × (1 − 𝑂𝑋) × × 𝐹 × 𝐷𝑂𝐶𝑓,𝑦 × 𝑀𝐶𝐹𝑦 ×
12
∑𝑦𝑥=1 ∑𝑗 (𝑊𝑗,𝑥 × 𝐷𝑂𝐶𝑗 × 𝑒 −𝑘𝑗×(𝑦−𝑥) × (1 − 𝑒 −𝑘𝑗 ))
Where,
RECH4,SWDS,y = Reference methane occurring in year Y generated from waste
disposal at a SWDS during a time period ending in year Y
x = Years in the time period in which waste is disposed at the SWDS,
extending from the first year in the time period(x=1) to year y(x=y)
y = Year of the crediting period for which methane emissions are
calculated
j = Type of residual waste or types of waste in the MSW
Wj,x = Amount of organic waste type j disposed/prevented from disposal in
the SWDS in the year x (t)

The each parameter is set as described in the table below based on the CDM
methodological tool “Emission from solid waste disposal sites v 07.0”
 Table 4.1.3 Parameter for the calculation of the reference emissions

Parameters Value Remarks

Default value for the model correction factor to account for model
φ 0.85 uncertainties.
0.85 for Application A and Humid/wet conditions is applied

GWP-CH4 25 Default Value

Oxidation factor (reflecting the amount of methane from SWDS

OX 0.1
that is oxidized in the soil or other material covering the waste)

F 0.5 Fraction of methane in the SWDS gas (volume fraction)

Fraction of degradable organic carbon in the waste type j (weight

DOCj 0.2
fraction) 0.2 for Garden, yard and park waste is applied

Fraction of degradable organic carbon (DOC) that decomposes

DOCf,y 0.5 under the specific conditions occurring in the SWDS for year y
(weight fraction)

Methane correction factor for year y. 0.4 for unmanaged-shallow

MCFy 0.4 solid waste disposal sites or stockpiles that are considered SWDS
is applied.

Decay rate for the waste type j. In the case of EFB, as their
Kj 0.17 characteristics are similar to garden waste, the parameter values
correspondent of garden waste(0.17) shall be used.

(4)Project emissions
Project emission are calculated according the formula below which is modified based on
the formula for project emission calculation in the CDM methodology AM0057 by
deleting the emissions from the biomass and waste transportation

PEy = PEFC, j,y + PEEC,y +PEPy,,y

Where,
PEy = Project emissions in year y (tCO2e/yr)
PEFC,j,y = Project emissions from fossil fuel combustion in process j during the year y
 (tCO2/yr)
PEEC,y = Project emissions from electricity consumption by the project activity during
the year y (tCO2e/yr)
PEPy,y = Project emissions in the off-gas from the pyrolysis process in year y (tCO2e)

4.2 Calculation result for estimation of the emission reductions

Table 4.2.1 Calculation result for estimation of the emission reductions

Year Total Reference Total Project Emissions
Emissions, Emissions, Reduction,
RE PE ER

(t CO2e) (t CO2e) (t CO2e)

1 4,066 2,884 1,182

2 7,497 2,884 4,612
3 10,391 2,884 7,507
4 12,833 2,884 9,948
5 14,893 2,884 12,008
6 16,631 2,884 13,746
7 18,097 2,884 15,213
8 19,334 2,884 16,450
9 20,378 2,884 17,493
10 21,258 2,884 18,374
Total 145,379 28,845 116,534
Decade
14,538 2,884 11,653
Average